Daniele Ballinari, University of Basel
ABSTRACT: Investments in sustainable assets have grown at a rapid pace over the last decade, amounting to a third of assets under management in the US today. Theoretical models partially attribute this increase to changes in investor taste for sustainability. We introduce a novel, market-wide measure of investor sentiment for sustainability and present evidence that it has a significant impact on trading activity and asset prices. We use microblogging data of investors from a social media investing platform to capture investors’ daily sentiment for environmental-, social-, and governance (ESG) related issues. In an empirical application, we find that changes in investors’ ESG sentiment predict higher (lower) stock returns for companies with a high (low) ESG rating.